Thailand: Penalty relief, profits and losses from investment projects

Thailand: Penalty relief, profits and losses

The Thai Revenue Department issued guidance concerning the tax treatment of profits and losses from multiple Board of Investment (BOI) privileges. The guidance was issued on 16 June 2016 and addresses the findings of court decisions and provides certain penalty relief for taxpayers that did not appropriately offset their profits and losses from multiple BOI privileges.

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The Supreme Court of Thailand in late 2015 (Cases No 15100/2558 and No 15345/2558 (30 December 2015)) held in favor of the Thai Revenue Department’s interpretation regarding the combining of profits and losses under multiple Board of Investment (BOI) privileges. 

In general, the BOI grants privileges (that in turn provide tax and non-tax benefits) to companies on a project-by-project basis. It is not uncommon that companies apply for multiple BOI privileges as they expand their business operations and take on new projects. 

In these high court cases, the taxpayers were granted multiple BOI privileges, and for corporate income tax purposes, they computed their net taxable profits separately for each BOI project. As a result, the taxpayers did not set off their losses from certain BOI projects against their profits from other BOI projects arising in the same accounting year. Rather, during the tax-exemption period, the taxpayers carried forward the losses to the next accounting year and/or set off such losses against non-BOI projects. 

The tax department disagreed with this approach, and asserted that the loss to be carried forward to the next accounting year and/or set off against profits from non-BOI projects is the amount of the net loss after setting off such losses against profits derived from any BOI projects in the same accounting year (even the profits from a specific BOI project that is still subject to the tax-exemption period). 

In the court’s view, since the BOI did not prescribe the rules and criteria in computing the net taxable profits of a company with multiple BOI privileges, the determination of net taxable profit is to be determined in accordance with the tax law. 

Relief from penalties

The Finance Minister issued a notification on 16 June 2016, providing that companies with multiple BOI privileges and that acted in good faith but did not, for corporate income tax purposes, set off their losses from BOI projects against profits from other BOI projects, will be allowed certain relief, as follows:  

  • Relief from penalties (which can be as high as 100% of the corporate income tax liability) and surcharges (at 1.5% per month), provided the taxpayer’s position is “regularized” by 1 August 2016
  • An extension until 1 August 2016 to file corporate income tax returns and make payment of the corporate income tax liabilities—and in situations when the taxpayer has already made payment of the corporate income tax, penalties and surcharges, and the three-year time period to apply for a refund has expired, the application to request a refund of the penalties and surcharges is also extended to 1 August 2016.


Read a June 2016 report prepared by the KPMG member firm in Thailand

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